ECB awaits political developments before adjusting ELA

The timely response by the Greek government in submitting a three-year ESM loan request yesterday contrasted with the gridlock over the past week and suggests we may finally be moving in the right direction before Sunday's deadline expires. 

Greater distances will have to be travelled and concessions made before getting assured that Grexit has been prevented, but hopes will rise if Athens can convince its creditors in the next 24 hours of its plans to reform. 

Tighter peripheral spreads led by the 10y BTP/Bund spread and a bounce in the Eurostoxx bear testimony to cautious optimism. The ECB yesterday decided to keep the ELAcap on Greek banks unchanged. Banks will stay closed through Monday, with the ECB awaiting political developments over the weekend before adjusting the ELA.